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Interview with ftcash co-founder Vaibhav Lodha, India
Vaibhav Lodha comes from a family with businesses in jewellery and automobiles. But instead of inheriting the family firm, Vaibhav was determined to forge his own career. An alumnus of Harvard University, armed with an engineering degree, he spent some years working in public policy and strategy, partnering with organisations like The World Bank and Swiss bank, LGT Group to bring clean water technologies to underdeveloped regions, before going on to start his own venture.
Today, Vaibhav is the co-founder of a company called ftcash, a fintech platform that enables easy cashless payments and loans for micro-merchants and entrepreneurs. In this interview with Tharawat Magazine, he shares the story of his entrepreneurial journey in fintech and how his company’s revolutionary payment and loan system is transforming the lives of micro-merchants and entrepreneurs across India.
What gave you the idea of starting your own company?
One Sunday morning, the doorbell rang and there was a newspaper delivery guy asking me for money. At the beginning of each month, I would have a newspaper deliveryman, milkman, grocery vendor and a laundry guy come to my house to collect payment for their services. In India, vendors like these don’t have online payment systems integrated with their businesses so it’s common practice to send someone around physically to collect payments. But on that morning, I didn’t have any cash at home so I had to ask him to come back later. It was such a small problem, but that day, it struck me as something that needed to change.
Imagine that this newspaper deliveryman had to collect money from 500 customers. Even if a fraction of them can’t pay him when he is at the door, he has to come back again and again, creating a big problem for the business. I was discussing this with two friends, Sanjeev Chandak and Deepak Kothari, and we quickly realised that they had faced similar issues in their own lives. That motivated us to use our complementary skills to tackle the problem head-on, and that’s how we came to start ftcash.
What was ftcash’s solution to this problem?
The idea behind ftcash was to create a product that would allow vendors and merchants to collect money without having to physically go to each customer. The challenge was that the product would have to work within the existing infrastructure because many vendors didn’t have smartphones or internet-enabled mobile devices. Whatever product we came up with had to work with the two things that they did have: a bank account and 2G phones.
How it works is that each merchant who signs up with ftcash is given a unique hyperlink, which they send to their customers via SMS when they need to collect a payment.
We came up with a solution based on hyperlinks. How it works is that each merchant who sign up with ftcash is given a unique hyperlink, which they send to their customers via SMS when they need to collect a payment. Customers can simply open the hyperlink and fill in their credit card or mobile wallet details, allowing them to make a quick payment without having to download a separate app or sign up for an online payment service. This was a game changer because it simplified the transaction process for both the customer and the merchant.
What is ftcash’s business model and how does it generate revenue?
One thing that we were clear from the beginning was that we would never charge upfront costs or monthly fees because such costs were the very reason that merchants avoided using e-payment solutions in the first place. Instead, we take a 1.8% commission on each transaction made through ftcash. But since payments is a volumes games, it cannot be a primary source of revenue stream for us because each transaction is already so small, so we began a loan business.
Once a merchant has used the ftcash payment service for three to six months, they become eligible for receiving loans to expand their business. The great thing about this is that because we act as their payment provider, we already have a deep and thorough understanding of how their business is doing. When a merchant applies for a loan, we look at their ftcash activity and credit history and are able to accurately assess what kind of customers they have and the volume of transactions that the business generates. If a merchant meets our criteria, they can take out a loan, which can progressively increase based on how solid they are with their repayments.
Many merchants and micro-entrepreneurs in India are looking for money to invest in and expand their businesses but face difficulty with traditional banks.
Our lending program is unique in that we can offer much cheaper loans compared to banks and financial lenders because our success rates are so high. The insights we have of the merchants’ businesses allow us to better predict the success of our loans, which in turn guarantees a healthy revenue for us. This has been great for the vendors too – in fact, they are lining up in droves and many of them signing up for the ftcash payment service just to access the cheap loans. Many merchants and micro-entrepreneurs in India are looking for money to invest in and expand their businesses but face difficulty with traditional banks. ftcash’s loan solution is a win-win because it incentivizes vendors to adapt digital payments much sooner, which is ultimately beneficial to their businesses and makes them more credit-worthy.
What were some of the challenges you faced as you ran your startup?
One of the biggest challenges came about six months after we raised our seed money. What happened was venture capital funding in India had completely dried because there were several startups scaled on discount led strategy which was not sustainable. So when we went out looking for our second round of fundraising, we ended up going on the road for six months to secure funds. The experience taught us to never let funding affect the running of the business. We went back to basics and focused on scaling quickly and being a profitable venture, and now in our current round of funding, we have received tremendous response.
In India, there is a term called ‘jugaad’, which mean ‘getting things done’. Sales people have to have the skills to simply get things done.
The second biggest challenge was recruitment. I realised that assembling the right team takes a lot of effort and time. When we were looking for staff, there were not enough people that understood our services. Initially, we hired expensive talent from good schools with a good pedigree, but it soon became clear that they were not the kind of workers who would be able to go out in the market for hours and sell. Instead, we found out that those who had experience in the retail sector had what it takes to go door to door and deliver results. In India, there is a term called ‘jugaad’, which mean ‘getting things done’. Sales people have to have the skills to simply get things done.
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If you could go back in time to when you first started ftcash, what advice would give to yourself?
Startups are rated on how quickly they are able to scale from one to ten and then from ten to one hundred. If I could go back to when I first started, I would probably tell myself to step on the gas from day one rather than slowly and meticulously planning our expansion. We tried to gauge, check, and understand everything before making decisions, probably because we all came from a corporate background and had a built-in sense of caution. I think it’s important to let go of that and not be afraid to be bold.
What is your goal and vision for ftcash?
In India, the value of consumer transactions today is $1.6 trillion. The number of merchants officially registered with the government is around 60 million. Of these, less than 2% accept electronic payments. That means 98% of the market is still open for us to capture. Imagine if we can guide a large chunk of the $1.6 trillion transactions through our platform. That will not only increase our volume but deliver huge benefits to society as well. This will create more wealth for merchants and help them grow, which is something banks and government organisations have not been able to do.
During their recent trip to India, Prince William and Kate Middleton (the Duke and Duchess of Cambridge) presented us with a Great Tech Rocketship Award at the UK Trade and Investment Conference. We are also part of a Paypal incubator. I think we are being recognized for showing that it’s possible to create an innovative fintech product while genuinely helping the people at the bottom of the social pyramid, and that will continue to be our goal going forward.
Tharawat Magazine, Issue 31, 2016
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